Which of the following statements is correct for a firm that is 55% debt-financed and the value of equity equals $58 million?

1) the debt is valued at approximately $68 million.

2) the debt is valued at approximately $32 million.

3) the firm is valued at approximately $129 million.

4)the firm is valued at approximately $105 million.

A firm is considering manufacturing a new product line. The cost of capital associated with the new product line depends on:

1) the form of financing for the product.

2) interest rate charged on their existing debt.

3) the degree of risk for the new product.

4) risk of the firm's outstanding equity.